Materials Yao-Yu Liu

Overview

Overview

Overview YTD Performance vs S&P 500 5 yr Performance vs S&P 500

Overview 1 yr Performance vs S&P 500 QTD Performance vs S&P 500

Industries within Materials Overview Industries within Materials Major Holdings

Business Analysis Late Expansionary cycle widens profit margins for this sector Trump’s Tax reform will strengthen sector if it succeeds Weaker dollar = Higher Commodities Prices Sensitive to economic strength/Demand driven Global Oversupply in commodities market Foreign competition Markets moving towards Late Expansion *End of 2016

Business Analysis Porter’s Five Forces Threat of New Entrants Low Unclaimed natural resources low High Gov. regulation High capital requirement Rivalry High Low differentiation b/w competitors Mature industry – Fight for market share Price competition high Buyer Power Leverage low differentiation in market Price competition high – easily able to switch suppliers Supplier Power Most companies have vertically integrated Low existing suppliers Threat of Substitutes Little to no substitutes for raw materials Many products highly specialized (chemicals)

Economic Analysis EURUSD vs Commodities

Economic Analysis S5MATR vs Crude Oil

Economic Analysis S5MATR vs US GDP Growth

Financial Analysis S5MATR Sales

S5MATR Operating & Gross Margin Financial Analysis S5MATR Operating & Gross Margin

Financial Analysis S5MATR Earnings

Valuation Analysis 10 yr SPX vs S5MATR

Valuation Analysis 10 yr Industry P/E

Valuation Analysis 10 yr Industry P/B

Valuation Analysis 10 yr Industry P/S

Valuation Analysis 10 yr Industry P/EBITDA

Recommendation Slightly Overweight (Keep SIM weight) US and various markets moving towards a Late Expansionary phase Weakened dollar will drive commodities prices up Highly cyclical and at the mercy of demand – hard to forecast Focus on Containers & Packaging Shy away from Metals & Mining

Questions?